- The Washington Times - Thursday, March 12, 2009

WASHINGTON (AP) - Congress will have to act to ease accounting rules that force banks to value assets at current prices unless regulators immediately do so, a senior House lawmaker said Thursday.

Rep. Paul Kanjorski, chairman of a House panel, held out the threat of legislation to pressure the Securities and Exchange Commission and the Financial Accounting Standards Board to take steps that would give relief to battered banks.

It was a reversal of stance for the Pennsylvania Democrat, who had previously said Congress shouldn’t intervene in establishing accounting rules such as the so-called mark-to-market standards now at issue.

The rule has drawn criticism because it has forced banks to take steep write-downs on mortgage-backed assets since the collapse of the housing market _ gutting their balance sheets even though the assets could eventually recover their value before the banks sell them.

As the financial crisis has ground on and banks large and small have foundered and failed, a banking industry push to suspend the mark-to-market accounting rules _ which hit a roadblock late last year _ has gathered momentum.

Kanjorski isn’t advocating suspending the rules but says the standards for determining what assets are worth must be changed to provide greater flexibility.

The mark-to-market requirement “has exacerbated the ongoing economic crisis,” he said at the opening of a hearing by the panel.

Proponents of mark-to-market rules argue that suspending or scrapping them would weaken transparency in companies’ financial statements, hurting investors and the capital markets. Critics say the rules mandate onerous write-downs _ sapping investor confidence in banks _ that don’t reflect the true value of soured, mortgage-linked assets and the prices they may fetch in the future.

SEC Chairman Mary Schapiro told another congressional panel Wednesday that “it is not our intention that these assets be written down to zero … or to fire-sale prices.”

The SEC doesn’t advocate suspending the rule. Schapiro said it is “pushing” the FASB, the independent standard-setting body, to come up with new guidance for companies that will provide “a better application” for determining what assets are worth. The FASB is expected to put out the new guidance in the second quarter.

Federal Reserve Chairman Ben Bernanke took a similar position regarding mark-to-market accounting in comments on Tuesday.

An SEC study issued in December recommended retaining the mark-to-market rule while suggesting improvements to current practices for valuing assets.

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